BILL ANALYSIS �
AB 2364
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CONCURRENCE IN SENATE AMENDMENTS
AB 2364 (Wagner)
As Amended August 21, 2012
Majority vote
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|ASSEMBLY: |74-0 |(May 29, 2012) |SENATE: |38-0 |(August 27, |
| | | | | |2012) |
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Original Committee Reference: JUD.
SUMMARY : Establishes procedures for service of process and
execution of levies at a central location designated by a bank
and its other branches. Specifically, this bill :
1)Requires a bank or financial institution that has more than
nine branch offices in this state, and authorizes those with
less than nine, to designate one or more central locations for
service of legal process within the state. Further provides
that if the institution fails to make the designation, then
each branch shall be deemed to be a central location at which
service may be made.
2)Requires the bank to file a notice of its designation with the
Department of Financial Institutions (DFI), and requires DFI
to update its online records to reflect current designations
within 10 days of filing. Further provides that DFI shall
provide this information to any person requesting it, and may
satisfy this requirement by making the information available
for free to the public on its Web site.
3)Clarifies that where a deposit account or property in a safe
deposit box is attached or has been levied upon, if the writ
of attachment or levy has been served at the designated
central location, the information described in the garnishee's
memorandum, which otherwise applies only with respect to
property available at the branch where the levy was made,
shall instead apply to all offices and branches of the bank,
except as provided.
4)Clarifies that if the bank has designated a central location
for service, unless the bank elects to treat legal process
served at a branch as effective, that legal process so served
on the branch will not reach those accounts or property and
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need not be reported on the garnishee memorandum.
5)Deletes the requirement that a writ of execution received at
the designated central location applies to all deposit
accounts held by the financial institution regardless of the
location of that property.
6)Clarifies that the effects of service of legal process and
execution of levies served within California is limited to
accounts and safety deposit boxes maintained at the bank's
branches and offices in this state (and not other states or
countries).
7)Increases, from 20 days to 30 days, the time from a judgment
creditor's motion of opposition by which a court must hold a
hearing to determine a judgment debtor's claim of exemption
from levy.
8)Makes corresponding technical changes necessary to allow
service of notices of adverse claims upon banks that have, or
have not yet, designated a central location for service of
process.
9)Makes corresponding technical changes necessary to allow the
Employment Development Department (EDD) to serve notice of
levy upon deposit accounts or other property held by banks for
employers, for the purpose of collecting delinquent employer
contributions to unemployment compensation programs.
The Senate amendments remove the requirement that a judgment
creditor's request to a bank for enforcement against a
particular account or safety deposit box be signed by the
creditor under penalty of perjury, instead requiring a simple
affidavit not signed under penalty of perjury, and make other
technical and conforming changes.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version approved by the Senate.
FISCAL EFFECT : According to the Senate Appropriations
Committee, ongoing costs of approximately $75,000 (Financial
Institutions Fund) to the DFI to maintain and update the
designations filed by financial institutions.
COMMENTS : According to the author, this bill is intended to
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modernize the procedures applicable to service of attachment and
execution levies against financial institutions. This bill
requires all financial institutions with more than nine
California branches, and permits smaller financial institutions,
to designate a central location at which they will accept
service of levies and other process that would be effective as
to all accounts statewide.
Under current law, a plaintiff or judgment creditor seeking to
levy on an account has to identify and separately serve each
branch of a bank at which the defendant or judgment debtor
maintains accounts to reach all of those deposits. According to
the bill's sponsor, the Consumer Financial Services Committee of
the Business Law Section of the State Bar (Business Law
Section), this is because current rules "reflect the
pre-Information Age practice by which all of a bank's customer
records were maintained locally at the branch at which the
account was maintained, often on index cards. One branch of a
bank did not have the tools to readily identify bank-customer
relationships at other locations of the same bank. Hence,
existing law was crafted to require service of levies on the
particular branch at which the account was maintained and
serviced."
According to the author, this bill seeks to address two problems
that arise from these current procedures for service of levies.
First, conducting discovery or a debtor's examination to
identify the proper branch to serve can add hundreds or even
thousands of dollars of unnecessary expenses to the cost of
judgment collection, a cost that may be added to the amount owed
by the judgment debtor. Second, the current requirement that
the judgment creditor serve the proper branch can also
facilitate the concealment of assets by a dishonest judgment
debtor, because an examination of the debtor to identify the
branch can prompt the debtor to move the funds and game the
system. By facilitating service of process at a central
location instead of at individual branches, the author contends
this bill will reduce unnecessary expenses on collection, and
will prevent unscrupulous debtors from manipulating the rules to
avoid their obligations. For example, given the relatively
concentrated nature of the banking industry today, the sponsor
estimates that a creditor serving levies on the central
locations designated by just a handful of the largest banks
would probably capture a sizable majority of all of the deposit
accounts and safe deposit boxes in California.
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This bill amends service of process rules for both attachment to
and execution of levies upon accounts, safe deposit boxes, and
other property held by the debtor or defendant's bank. In
short, attachment can be seen as a pre-judgment security device,
while execution of levy is a post-judgment collection device.
Specifically, attachment is an order by a court, while a civil
action is pending, directing that money or property of the
defendant be held as security for the eventual satisfaction of a
judgment, if one is obtained. In other words, attachment is a
provisional remedy to aid the plaintiff in the collection of a
money judgment by seizure of the defendant's money or property
in advance of a trial or judgment. It is ordered when a court,
after a hearing on an application for a writ of attachment,
finds that the plaintiff has established the probable validity
of the claim, and that other requirements have been met. In
contrast, writs of execution are issued only after judgment is
entered by the court. They permit the judgment creditor to
collect against the property of the judgment debtor, including
deposit accounts held by a financial institution.
Although current law permits, but does not require, a bank to
designate a central location at which it would accept service of
levies for accounts throughout its branch system, to date most
banks in California have declined to utilize this designation
procedure. This is true, according to the Business Law Section,
even though the development of information processing systems
has enabled virtually all financial institutions to centrally
process transactions, statements, etc., throughout their branch
systems, and many banks that operate multiple branches have
already elected to process levies on a centralized basis.
The Business Law Section suggests two explanations for this.
First, under current law, the designation would have the effect
of extending the reach of any levy not only statewide, but to
accounts located in other states and countries, creating a
potential duty to conduct nationwide and worldwide searches of
databases that banks have been unwilling to assume. The bill
seeks to address this concern by providing that the reach of any
levy or writ served upon a bank's central location for
California only extends to accounts in California. The second
reason cited is that current law lacks specificity as to how the
designation would be made or communicated to a creditor seeking
to serve the bank with a levy. The bill seeks to address this
concern by requiring each bank to file a notice of its
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designation with DFI, and by providing incentives to DFI to
maintain and update this information for free on its publically
available Web site.
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334
FN: 0005384